IIFC to raise $500 mn through the ECB route; Standard Chartered appointed as lead arranger

India Infrastructure Finance Company Limited (IIFC) will raise $500 mn through the external commercial borrowings (ECB) route. Standard Chartered Bank will be the lead arranger to the issue. The funds are being raised for a period of 10 years. The resource will be used for financing some major infrastructure projects in the country.

During 2007-08, IIFC, a wholly-owned special purpose vehicle of the Indian government for core sector lending, intends to sanction some 46 projects, aggregating Rs. 15,000 crores and disburse nearly Rs. 3000 crores. A major chunk of this Rs. 3000 crores funding requirement will be met through overseas borrowings.

IIFC’s paid-up capital is Rs. 100 crores. It sanctions loans up to 20% of the project cost. Out of the 46 projects which are under the IIFC’s consideration, 31 are road development ventures, 12 are power projects, 2 are port-related infrastructure ventures, while 1 is an airport project. To ensure proper usage of funds, IIFC has appointed ICRA to work out a detailed business roadmap. ICRA is expected to submit the report within a month. It will also recommend an HRD strategy suited to IIFC’s needs.

Apart from some of major infrastructure projects, IIFCL is also working with the municipal corporations and urban local bodies to develop urban infrastructure projects. IIFC has tied up with IDBI, Canara Bank and IL&FS to create a Rs. 3000 crore-pooled municipal debt obligation (PMDO) facility. The fund will be channelized for urban infrastructure development.

Read more in The Economic Times article.
Related Post:
Citigroup, Blackstone, IDFC, IIFC tie-up for $5bn India Infrastructure Financing Initiative fund

Citigroup, Blackstone, IDFC, IIFC tie-up for $5bn India Infrastructure Financing Initiative fund

US-based financial services giant Citi and private equity major Blackstone have joined hands with infrastructure finance companies IDFC and India Infrastructure Finance Company Limited (IIFC) to set up a $5 bn (Rs. 22,000 crores) fund to finance the India Infrastructure Financing Initiative. According to government estimates, infrastructure development in India would require $320 bn in the next five years. The India Infrastructure Financing Initiative will have equity and quasi-equity of $1 bn and $3 bn long-term debt. The equity financing programme will be managed by IDFC and the fund will be invested in greenfield, brownfield and operating projects. Debt financing will be channeled through IIFC, in several tranches over the next three years for projects appraised by IDFC, certain banks and financial intermediaries. IDFC, Citi and Blackstone will together invest $250 mn while the balance is expected to come from reputable international investors as well as select domestic institutional investors, including IIFC.

Read the article in Business Standard and The Economic Times.

Govt to raise ECB cap from $22 bn to $18 bn

The government will now allow companies to raise more foreign loans. It has asked the Reserve Bank of India to raise the external commercial borrowing (ECB) ceiling for 2006-07 to $22 bn, instead of $18 bn at present.

The move is expected to help companies like Reliance Communications, whose applications to raise $4 bn is awaiting approval. The Reliance Communications board had cleared a proposal to let the company raise long-term resources including ECBs. The board had also approved raising $1 bn through foreign currency convertible bonds. Reliance Communications had filed three applications for raising $4 bn, with two of them seeking permission for loans worth $500 mn each and the third for $3 bn. Apart from Reliance Communications, India Infrastructure Finance Company Limited, the special purpose vehicle set up by the Centre last year, is also expected to raise a sizable amount to finance core sectors developed by PSUs and through the public-private partnership model. Another infrastructure finance company, IDFC, has already started the process to raise ECBs to finance projects.

With interest rates in India on the rise, more domestic companies are expected to opt for ECBs to lower interest costs. Till December, Indian companies raised $14.3 bn through ECBs, and with proposals for another $6-7 bn awaiting clearance by a high-level committee, the government had little choice but to raise the cap on ECBs.

Read the article in The Times of India.